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With all the focus directed to solar and wind power, it's often overlooked that renewables also include turning biomass into biofuels.
And the latter has one decisive advantage over solar or wind (or geothermal for that matter)…
Biomass remains the only renewable source that can be turned directly into liquid fuel.
That makes biofuels the only "renewable" power source that can directly fuel today's cars, planes, and ships.
But how that translates into what we see in the marketplace has been a source of friction for years. This involves the system created 12 years ago that mandates how much ethanol must be mixed in the gasoline sold at retail nationwide.
That policy has been a political football, pitting oil-producing states – who want as much petroleum-based product in gasoline as possible – against agricultural states – who want as much biofuel as possible to be used.
The former states claim the mandated biofuel in gasoline restrains oil drilling. The latter regard the standards as a necessary support for farmers.
That fight is now coming to a head, but it looks like biofuel farmers and companies are safe.
Because they were just saved by someone you'd never expect…
Biofuels Work Surprisingly Well
What's possibly even worse than the political fighting is that bringing biofuels into the gasoline mix has spawned its own version of "alphabet soup."
The Renewable Fuel Standard (RFS) is the federal program that requires transportation fuel sold in the United States to contain a minimum volume of renewable fuels.
The RFS originated with the Energy Policy Act of 2005 and was expanded and extended by the Energy Independence and Security Act of 2007 (EISA).
The biofuel used in the mix is limited to 10% ethanol content for most gasoline and diesel sales. This limit is often referred to as the "blend wall."
Raising it to 15% is seen by some as helping to meet the statutory minimums set out in EISA. But increasing it beyond 15% would require modifications to the fuel systems of conventional engines.
That's because higher concentrations of ethanol damage the kind of internal combustion systems found in most automobiles.
The amount of ethanol used is also limited by the number of flex-fuel vehicles available. Flex-fuel vehicles are capable of operating on ethanol blends as high as 85% (E85), and the relative pricing of E85 as compared to regular gasoline with the 10% ethanol content (E10) can be problematic.
There is also another drawback. The more ethanol in the mix, the lower the performance, because ethanol on average provides only about 84% of the power of straight high-octane gasoline.
Other alternative fuels may have higher functional "blend walls." Biobutanol may be legally blended up to 16%, operating as an E10 equivalent, though it is possible to operate at as high as 20% butanol without engine modification.
But these blends are not in wide use and have their own performance and pricing problems.
The U.S. Environmental Protection Agency (EPA) administers the RFS program with volume requirements for several categories of renewable fuels.
The EPA calculates a blending standard for each year based on estimates of gasoline usage calculated by the Department of Energy's Energy Information Administration (EIA).
Separate quotas and blending requirements are determined for cellulosic biofuels, biomass-based diesel, advanced biofuels, and total renewable fuel. Exemptions for small producers are considered when calculating blending ratios.
Advanced biofuels are required to meet stricter air pollution requirements than regular corn-based ethanol.
This entire system has strangely enough worked rather well. But it has hardly been shielded from political potshots…
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.